Aging Populations cause Falling Revenue and Greater Spending Obligations in Japan and the United States

Posted by PITHOCRATES - January 5th, 2013

Week in Review

President Obama added $5.3 trillion in new debt in his first term.  Approximately the sum total of all debt added from George Washington to George H.W. Bush (in real dollars).  It took about 200 years to accumulate that massive amount of debt.  It only took President Obama 4 years.  Yet according to the Left we have a revenue problem.  Not a spending problem.  But when you add about 200 years of debt into only 4 years you have a spending problem.

In the recent fiscal cliff theatre the Democrats got a bipartisan compromise.  They got the higher tax rates they wanted.  And the Republicans gave them those higher tax rates.  The very meaning of bipartisan to the Democrats.  Unconditional surrender so they can get their way.  And now the total debt is around 103% of GDP.  Which means we owe as much as the nation produces in economic activity.  Meaning that we ain’t paying it down anytime soon.  And with our aging population things are only getting worse.  More workers are leaving the workforce consuming retirement and health care benefits than are entering the workforce to pay for them.  Which means the problem is only going to get a lot worse.

Eternal Keynesian optimists on the Left, though, like to point to Japan.  Whose total debt is about 230% of their GDP.  They say if Japan can get along with a debt of 230% of GDP then we have nothing to worry about.  Well, the Japanese are starting to worry (see Japan’s population logs record drop by AFP/fa posted 1/1/2013 on Channel News Asia).

Japan’s population logged a record drop in 2012, health ministry estimates showed on Tuesday, highlighting concerns that an ever-dwindling pool of workers is having to pay for a growing number of pensioners…

Japan is rapidly greying, with more than 20 percent of the population aged 65 or over — one of the highest proportions of elderly people in the world.

The country has very little immigration and any suggestion of opening its borders to young workers who could help plug the population gap provokes strong reactions among the public.

Japan has a lot to worry about.  And the last thing we want is to have their problem.  The Left understands this.  Which is one of the reasons they want to grant immunity to all those in the country illegally.  So they can tax them.  But when you’re buying votes by giving away free stuff you’re still going to have a spending problem no matter how much you increase revenue.  Especially when your spending has pushed the national debt past 100% of GDP.

As the population continues to age revenues will shrink.  This is the reality we have here (as well as what the Japanese are facing).  Adding a new entitlement, Obamacare, was the height of fiscal irresponsibility.  It will quickly push our debt up to Japanese levels.  Who will have a very painful day of reckoning in the not so distant future.  Higher spending obligations and falling revenues can only lead to one place.  And it isn’t a good place.  Just ask the Greeks.

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